Urgent reforms in the child support system are needed to halt the "tragic" scale of family breakdown, Families Minister Maria Miller has said.

Statistics show that one in five children from a broken home loses touch with a parent within three years and never sees them again, while many more lose contact as they grow older.

The Government is to propose the biggest overhaul of child maintenance for a decade, arguing that the current system encourages conflict between parents.

Speaking in the Daily Mail, Ms Miller said: "We know that if effective financial arrangements are in place, those parents are much more likely to stay in contact and much more likely to have a strong relationship with their children. Staying in contact with both parents is absolutely critical to give a child the best start in life."

The minister said the latest figures showed there were 3.5 million children from broken homes, with almost half having no effective maintenance arrangements.

"Twenty per cent of children from separated families lose contact with the non-resident parent within just three years," she added. "That is a tragedy. But the current system entrenches conflict when families separate."

Under the proposals, separating parents will be encouraged to find a settlement on their own and those who insist on state intervention will now have to pay a fee. Payments will be overseen by the Child Maintenance and Enforcement Commission, which is taking over the work of the Child Support Agency.

Ministers claim there is currently a £4bn arrears in maintenance payments from non-resident parents. Ms Miller said the child maintenance system costs £460 million a year.

She also pointed to research that suggested children who are not brought up in a two-parent family are 75% more likely to fail at school, 70% more likely to become a drug addict, 40% more likely to have serious debt problems and 35% more likely to become unemployed or welfare dependent.

Ms Miller added: "We know that the most effective and enduring arrangements are ones that parents come to themselves."